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Thursday, 30 June 22
WHY ARE LNG SHIPPING STOCKS RESILIENT? - DREWRY
LNG shipping stocks are proving resilient despite uncertainties about growth in global GDP, high inflation and the ongoing geopolitical crisis caused by the Russia-Ukraine conflict. Drewry’s LNG shipping equity index increased by 12.7% YTD as of 28 June 2022, outperforming S&P 500 which declined by 19.8% during the same period. Golar LNG stock price surged the most (up 87.9%), while Flex LNG increased by 24.8% and Nakilat by +18.2.%. LNG stocks have mainly benefited from the rising European LNG demand as the region switches away from Russian natural gas. We explore the reasons for the resilience of LNG shipping stocks amid the sell-off in the broader equity market and whether investors should consider adding LNG stocks to their portfolios.
FSRU focused stocks are key beneficiaries
Companies with FSRU exposure have particularly benefited as European countries are opting for FSRUs over their land-based counterparts. FSRU terminals can be installed in one-two years compared to three years for LNG import terminals. Golar LNG’s share price has profited from its exposure to FSRU, the company’s stake in New Fortress Energy (NFE – a leading FSRU player) and high crude oil prices. Amid a buoyant FSRU market, Golar LNG has entered into a contract with Snam to sell its 19-year-old LNG vessel Golar Arctic for USD 287.9mn (EUR 269mn) as an FSRU after conversion. The company has also signed an agreement with Snam to sell Golar Tundra FSRU for USD 350mn. NFE, which has a fleet of seven FSRUs and in which Golar LNG has a stake of 6%, has gained 68.5% YTD.
FSRUs are in high demand with Europe seeking at least 16 FSRUs to replace most of the Russian gas imports. We believe countries like Germany, France and Italy are willing to pay a high premium to acquire the assets, but with only 50 FSRUs (as of March 2022) in operation globally, the demand for FSRU providers has strengthened.
Buoyant market drives new charter wins
The upcoming EEXI and CII regulations and charters’ desire to secure LNG ships amid the geopolitical tensions are other factors driving LNG shipping demand. Flex LNG has won fixed charter for 12 vessels since March 2021, suggesting strong demand for its young fleet, with three of these charter wins in June 2022. Latest charter wins announced in June 2022 extend between seven and ten years, longer than most of the company’s existing charters and suggest increasing preference of charterers to go for longer term charter. Nakilat announced during its 4Q21 results that it has won the term-charter for all the four newbuild vessels delivered between 2Q20 and 1Q22.
LNG shipping prospects
The Russia-Ukraine war has brought the energy sector to the center stage with more focus on the LNG industry as Europe tries to wean away from Russian LNG imports and is ramping up its LNG import facilities by investing in FSRUs. As the coming years should see more FID for LNG liquefaction projects, leading to higher demand for LNG ships, we expect spot and long-term LNG shipping rates to firm up. LNG shipping companies stand to benefit from this high charter rate environment. Expectations of tight LNG supply and European geopolitical tensions is accelerating sale and purchase agreements for LNG and in turn, FIDs for new LNG projects. Charterers are preferring long-term charter to cover volatility in a tight supply market. While new order momentum is high in 2022 YTD with close to 100 LNG ship orders, we expect LNG shipping rates to continue to rise as most of the new orders have firm charter.
Upcoming EEXI and CII regulations to support LNG freight rates
As EEXI and CII regulations come into effect from 1 January 2023, we expect an increase in conversion activity of older stream turbine vessels into FSU for import projects as we believe these vessels will be more impacted by the new regulations. While these vessels will need to reduce their speed to comply with the regulations, the very old vessels will become unviable and will exit the fleet, affecting capacity and consequently supporting higher freight rates.
More borrowing capacity with a healthier balance sheet
LNG shipping companies have a healthier balance sheet at the end of 1Q22 compared to 4Q20. Furthermore, an increase in LNG vessel prices since mid-2020 indicates higher borrowings potential which can be used to acquire new vessels. Given the strong prospects, it is comparatively easier now to win a long-term charter compared to the previous two years.
Conclusion
We expect earnings of LNG shipping companies to benefit from positive LNG shipping prospects in the coming quarters. Given the tight LNG shipping prospects and LNG stocks’ resilience thus far, we believe investors can consider adding LNG shipping stocks to their portfolio. We prefer companies with solid revenues, young fleet and healthy balance sheet.
Source: Drewry
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Wednesday, 17 August 22
CHINA'S COAL-RICH SHANXI MAKES STRIDES IN HIGH-QUALITY DEVELOPMENT - XINHUA
Shanxi, a major coal-producing province in north China, has made continuous advances in high-quality development over the past decade, according to ...
Wednesday, 17 August 22
PAXOCEAN, HONG LAM MARINE AND BUREAU VERITAS SIGN MOU TO DEVELOP AMMONIA BUNKER VESSEL DESIGN - BUREAU VERITAS
PaxOcean Engineering Pte. Ltd. has signed a Memorandum of Understanding (MOU) with Singapore-based bunker vessel operator Hong Lam Marine and class ...
Wednesday, 17 August 22
GOODFUELSS ASIA-PACIFIC BRANCH KICKSTARTS SUSTAINABLE BIOFUEL DELIVERIES WITH NYK AS FIRST CLIENT - GOOD FUELS
GoodFuels, the leading biofuels pioneer for the global transport industry, has today announced that it has successfully supplied sustainable marine ...
Tuesday, 16 August 22
EU BAN ON RUSSIAN COAL IMPORTS COMES INTO FORCE - DEUTSCHE WELLE
The European Union banned Russian coal imports in response to the invasion of Ukraine as part of sanctions in April. Since then, it’s been sc ...
Thursday, 11 August 22
MARKET INSIGHT - INTERMODAL
On July 22nd, Ukraine signed a deal with Russia to release 22mn tons of grain from Ukraine’s 3 major ports (Yuzhny, Chornomorsk, Odesa). Such ...
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- Bulk Trading Sa - Switzerland
- Jorong Barutama Greston.PT - Indonesia
- New Zealand Coal & Carbon
- Global Business Power Corporation, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Xindia Steels Limited - India
- Directorate Of Revenue Intelligence - India
- Gujarat Mineral Development Corp Ltd - India
- Simpson Spence & Young - Indonesia
- White Energy Company Limited
- Eastern Coal Council - USA
- The State Trading Corporation of India Ltd
- Global Coal Blending Company Limited - Australia
- GVK Power & Infra Limited - India
- Essar Steel Hazira Ltd - India
- Bhatia International Limited - India
- Vizag Seaport Private Limited - India
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- Latin American Coal - Colombia
- Antam Resourcindo - Indonesia
- Eastern Energy - Thailand
- PetroVietnam Power Coal Import and Supply Company
- London Commodity Brokers - England
- Siam City Cement - Thailand
- Straits Asia Resources Limited - Singapore
- Kepco SPC Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- European Bulk Services B.V. - Netherlands
- Toyota Tsusho Corporation, Japan
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Chamber of Mines of South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- Bhushan Steel Limited - India
- Goldman Sachs - Singapore
- Marubeni Corporation - India
- OPG Power Generation Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Agrawal Coal Company - India
- GN Power Mariveles Coal Plant, Philippines
- Thiess Contractors Indonesia
- Sarangani Energy Corporation, Philippines
- The Treasury - Australian Government
- Ceylon Electricity Board - Sri Lanka
- Oldendorff Carriers - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Central Electricity Authority - India
- Romanian Commodities Exchange
- Mercuria Energy - Indonesia
- Independent Power Producers Association of India
- Mintek Dendrill Indonesia
- The University of Queensland
- Chettinad Cement Corporation Ltd - India
- Maheswari Brothers Coal Limited - India
- Commonwealth Bank - Australia
- Gujarat Sidhee Cement - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Orica Australia Pty. Ltd.
- Sical Logistics Limited - India
- Parliament of New Zealand
- Samtan Co., Ltd - South Korea
- Meralco Power Generation, Philippines
- Kideco Jaya Agung - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Finance - Indonesia
- Heidelberg Cement - Germany
- Iligan Light & Power Inc, Philippines
- Grasim Industreis Ltd - India
- Kaltim Prima Coal - Indonesia
- Star Paper Mills Limited - India
- Price Waterhouse Coopers - Russia
- Salva Resources Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Edison Trading Spa - Italy
- Petrochimia International Co. Ltd.- Taiwan
- SMG Consultants - Indonesia
- Interocean Group of Companies - India
- Electricity Generating Authority of Thailand
- Intertek Mineral Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- South Luzon Thermal Energy Corporation
- Indonesian Coal Mining Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rio Tinto Coal - Australia
- SMC Global Power, Philippines
- Bukit Baiduri Energy - Indonesia
- Australian Commodity Traders Exchange
- Kumho Petrochemical, South Korea
- Uttam Galva Steels Limited - India
- Petron Corporation, Philippines
- Bharathi Cement Corporation - India
- Bukit Makmur.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Global Green Power PLC Corporation, Philippines
- ICICI Bank Limited - India
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- IHS Mccloskey Coal Group - USA
- Baramulti Group, Indonesia
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- Anglo American - United Kingdom
- Renaissance Capital - South Africa
- Jindal Steel & Power Ltd - India
- Madhucon Powers Ltd - India
- Standard Chartered Bank - UAE
- Kartika Selabumi Mining - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Mercator Lines Limited - India
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Thai Mozambique Logistica
- Binh Thuan Hamico - Vietnam
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Aditya Birla Group - India
- Riau Bara Harum - Indonesia
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- Vedanta Resources Plc - India
- Australian Coal Association
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Indian Energy Exchange, India
- Semirara Mining Corp, Philippines
- Coal and Oil Company - UAE
- Sakthi Sugars Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Minerals Council of Australia
- Deloitte Consulting - India
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- PTC India Limited - India
- Miang Besar Coal Terminal - Indonesia
- Parry Sugars Refinery, India
- Port Waratah Coal Services - Australia
- Singapore Mercantile Exchange
- Indian Oil Corporation Limited
- Maharashtra Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- ASAPP Information Group - India
- Barasentosa Lestari - Indonesia
- Orica Mining Services - Indonesia
- Merrill Lynch Commodities Europe
- Altura Mining Limited, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Videocon Industries ltd - India
- Krishnapatnam Port Company Ltd. - India
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining and Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- CNBM International Corporation - China
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- Makarim & Taira - Indonesia
- Sojitz Corporation - Japan
- Neyveli Lignite Corporation Ltd, - India
- GMR Energy Limited - India
- Metalloyd Limited - United Kingdom
- McConnell Dowell - Australia
- Wilmar Investment Holdings
- Carbofer General Trading SA - India
- Ministry of Transport, Egypt
- Kapuas Tunggal Persada - Indonesia
- Karaikal Port Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- San Jose City I Power Corp, Philippines
- Medco Energi Mining Internasional
- Africa Commodities Group - South Africa
- Gujarat Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
- Borneo Indobara - Indonesia
- Energy Link Ltd, New Zealand
- Pendopo Energi Batubara - Indonesia
- Attock Cement Pakistan Limited
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Bangladesh Power Developement Board
- Economic Council, Georgia
- Tata Chemicals Ltd - India
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Malabar Cements Ltd - India
- Trasteel International SA, Italy
- Ind-Barath Power Infra Limited - India
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- PowerSource Philippines DevCo
- AsiaOL BioFuels Corp., Philippines
- Vijayanagar Sugar Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- GAC Shipping (India) Pvt Ltd
- Indo Tambangraya Megah - Indonesia
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- Timah Investasi Mineral - Indoneisa
- Power Finance Corporation Ltd., India
- Banpu Public Company Limited - Thailand
- Manunggal Multi Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- Planning Commission, India
- MS Steel International - UAE
- Lanco Infratech Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kalimantan Lumbung Energi - Indonesia
- Cement Manufacturers Association - India
- PNOC Exploration Corporation - Philippines
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